FIU-led hurricane loss model recertified by the state of Florida

The FIU-led Florida Public Hurricane Loss Model (FPHLM) was recertified by the state of Florida for the next two years. The $960,000 grant pays to update and run the existing program.

A joint project with four other universities, the model is the State of Florida’s benchmark for evaluating the financial risks faced by insurance companies that write windstorm policies, and, in turn, set the premiums paid by their customers.

Shahid Hamid, chair of FIU College of Business’ Department of Finance and director of the Laboratory for Insurance, Financial & Economic Research, part of FIU’s Extreme Events Institute (EEI), describes the hurricane loss model as a very useful tool for both insurance companies and government entities.

The FPHLM’s computer programs simulate and predict how, where and when hurricanes form, their intensity and track, how they will interact with different types of structures and how much damage they will cause to roofs, windows, doors and interiors, and contents.

“Fairly priced and reliable insurance is the key to community resilience to hurricanes,” said Richard Olson, director of the EEI. “For many Florida families, insurance determines how well – and how quickly – they bounce back from storm damage.”

The program, which has been ongoing since 2001, also estimates how much it will cost to rebuild from the damage and how much of the loss will be paid by insurers. According to the FIU team’s research, because of deductibles, insurance companies normally pay for 25 percent to 45 percent of losses from a Category 1 hurricane and the payments increase to at least 85 percent for Category 5 storms.

Hamid’s team includes specialists in meteorology, storm surge, hydrology, engineering, finance and actuarial science, computer science and statistics from FIU as well as the University of Florida, Florida State University, the Florida Institute of Technology, the University of Miami and the National Oceanic and Atmospheric Administration.

In addition to the hurricane loss model, the team is working on flood risk and loss model which should be completed in 2022.